Yum China Soars After Pizza Hut Turnaround Fuels Earnings

Yum China, the Asian offshoot of the US fast-food giant, rallied as much as 14 per cent in late trading after a turnaround at its Pizza Hut chain helped earnings outstrip estimates in the first quarter.

Pizza Hut’s same-store sales climbed 2 per cent in the period, which ended Feb. 28. Analysts had predicted that growth would be flat, according to Consensus Metrix. That contributed to profit of 44 cents a share, well ahead of the 38-cent average estimate.

The results signal that the company is enjoying a strong start after its spinoff from Yum! Brands Inc. last year. The business, which has more than 7,600 restaurants, has been attracting customers with a loyalty program and more delivery options. Yum China also is hoping to fuel growth with Taco Bell: An outpost of the Mexican-food restaurant opened in Shanghai in December, and there are plans for more this year.

The shares rose as high as $32 in post-market trading after the results were released. Yum China had gained 7.9 percent this year through Wednesday’s close, while its former parent was up less than 1 percent.

Yum China has been working to turn around Pizza Hut by simplifying its menu and speeding up service.

The company’s KFC division also exceeded expectations last quarter. It posted a 1 percent gain in same-store sales, compared with the 2.4 percent decline analysts had predicted. Yum China’s overall sales also gained 1 percent by that measure.

The company was spun off from its U.S. parent in October, letting that business focus on improving its domestic operations. Investors such as Keith Meister had lobbied for the breakup. Meister stepped down from the fast-food giant’s board earlier this year.